Lisa Owen interviews Tony Ryall

Minister
admits Health Benefits Limited's deadline to save $764m by
2015/16 will be missed - "those savings might happen in
another year or so after that timeline" or even in "three or
four years’ time"

"...it’s going to take a little bit
longer and it’s for very good reason, we want to make sure
that the implementation is right".

Says the project
is currently under its $90m budget and making savings, but
that DHBs may be asked to contribute more than that to
generate greater savings.

Ryall says current budget is
$90m to save $4-500m, but relaxed about going over budget:
"If it ends up being maybe a 100-million dollars to generate
those 4 or 500-million dollars, look I think it’s worth
the DHBs considering the investment".

But rejects
suggestion in leaked memo by anonymous senior health manager
that the budget blowout could reach $130m.

HBL reforms
"heading in the right direction" and complaints by DHB
financial chiefs "have been taken very seriously".

Accepts
that savings made on backroom spending aren't due to just
HBL, but are "collaborative efforts"

Denies claims in that
memo that a "climate of fear" in DHBs is stopping greater
criticism of a policy that is "destroying value" and
operating like a "Ponzi scheme" - "nothing could be further
from the truth".

Describes the memo as "a political
response" designed to cause trouble for National 12 weeks
from an election

Lisa Owen: The
financial officers from these district health boards say
that they have lost… they have “severely diminished”
confidence in Health Benefits Limited; do you think
they’re right to have those concerns?

Tony
Ryall: Well those were concerns that were expressed several
months ago and they’ve been taken very seriously by Health
Benefits Limited and the district health boards. And the
Chief Financial Officers and the CEOs are now much more
involved in the process and in fact driving the
implementation of key parts. The important work that they
are doing is making sure that we can harness the power of
bulk purchasing and standardisation to free up cash that can
be reinvested in front line services. It’s very important
work and it’s great that they’re
involved.

Health Benefits Limited itself has
actually admitted that it hasn’t been as transparent as it
should be during this process and I also understand that
PricewaterhouseCoopers and Ernst & Young are revising the
project. So isn’t that in itself an admission that all is
not well?

Well look it’s a pretty difficult
area to be working in. If you’ve got to recall where
we’ve come from, six or seven years ago you had twenty
DHBs who were doing their own procurement and purchasing,
and separately it’s rather inefficient. So we’re trying
to move to a new environment where there’s much more
collaboration. And it does mean people have to change the
way they do things. We’re wanting to make sure that
that’s done in a very stepwise and sensible way. The CFOs
expressed some concerns about the level of engagement with
them, they’re now much more involved and we’re
continuing on the path to make sure that we can get those
savings to free up cash to put back into front line
services. So far DHBs are –

So are you
satisfied all is well?

Ah look, I think
we’re heading in the right direction. It’s a pretty
crunchy thing, it’s pretty big what they’re trying to
do. And there’s always going to be people in the system
that we’ve got who are going to express some concern about
it. But I think we are heading in the right direction.
Already HBL and the DHBs have saved over 250-million dollars
together through a number of their initiatives, that all
goes back into frontline services. So we’re just going to
continue that momentum.

So Minister I want to
have a look at those numbers. You’ve raised those numbers
so let’s take a look at them. By its own projections
Health Benefits Limited says it’s going to save
764-million dollars by 2015 and 2016, you mentioned the
213-million that’s already been saved, that leaves
500-million dollars to save in about 18 to 20 months. I mean
how is that going to happen?

Ah look, those
savings might happen in another year or so after that
timeline. As you know the current-

So behind
schedule already?

Ah well I think it’s
going to take a little bit longer and it’s for very good
reason, we want to make sure that the implementation is
right. And if it means we have to take a little bit of extra
time to do it, then I think that’s better. We want to make
sure that the investments come in. If this is an argument
about whether it’s going to be 700-million in two years’
time or three years’ time or four years’ time, the real
important is to make sure that we get those
savings.

But doesn’t that worry you as
Minister that it’s already behind schedule? Doesn’t that
worry you as Minister?

Well key parts of the
programme are running on time and they are delivering the
results that we want. But this is quite a complex change, it
involved twenty district health boards, there’s a lot of
people involved and I think there is benefit in slowing
things down in some areas to make sure that we get the
savings that people want. And that’s important. If
there’s one thing I’ve learnt in 24 years in politics is
implementation is vital and that’s why we want to make
sure that so much effort is going into ensuring that when
these things are rolled out they are rolled out well and we
get the savings that people are looking for. And we have to
make –

Let’s look at the cost of that
implementation Minister. In a letter from a senior DHB
manager, a memo, it’s cited that the costs have ballooned
from 87-million dollars to 130-million and that the savings
have dropped by about a third of the projections. Is that
right?

Ah look that’s a very political
letter that’s unsigned, undated and it’s being
circulated.

Is that right?

Ah
no, look you’ve been provided information which actually
says that the finance procurement supply chain programme is
currently running under budget. But if the DHBs want to
invest some more money in the future to maximise and
optimise the benefits, then that’s a decision that they
would make. I don’t think you can rely on what’s been
put out in that memo released…

So your
project is on budget?

…released twelve
weeks before the election, with a lot of inflammatory
language in it.

So your project is on
budget? Just to be clear, you are confident that it is on
budget?

Well the information I’ve received
is it’s operating within budget but they will - the DHBs
will have to make a decision about maximising and optimising
benefits that they may want to put some more money in. So
instead of maybe being 90-million, it might end up being,
let me just –

So you are going to ask for
money Minister? Just to be clear on this Minister, Health
Benefits Limited has told us that it is potentially going to
be asking DHBs to contribute more. So are they going to be
asked for more and how much more?

Ah that’s
up to the DHBs to decide whether they want to invest or not.
This is a programme where the current budget is about
90-million dollars to generate savings of about
4-500-million dollars. If it ends up being maybe a
100-million dollars to generate those 4 or 500-million
dollars, look I think it’s worth the DHBs considering the
investment. Because it’s a very big change that they are
making.

So you can’t guarantee that this
project is not going to be blowout. You’re talking about
figures of a hundred-million dollars it might cost, so you
can’t guarantee that it’s not going to blow
out?

This is a big project. I don’t think
you’re going to see a blow out on the proportions that
this leaked political note that has been getting some media
coverage is about. The DHBs will make a call on whether
there are sufficient benefits to make an additional
investment in this project. But if this is an argument about
spending 90-milion to make 500-million or a hundred million
to make 500-million I think you’re missing the point. The
point here is that we want to get the 20 DHBs working in a
more efficient way and how they buy goods and services so
that they can get the power of bulk purchasing. Already
working together, Lisa, working together they have saved
about 5-million dollars on banking, they’ve saved 6 or
7-million dollars on insurance. And so this makes a lot of
sense. Let me give you this example -

No no,
let’s… Minister, I want to talk to you about those
savings because I’ve looked at two auditor-general
reports, a statement of intent from the company itself and
actually a report to the select committee. All of those
identify the fact that HBL is taking credit for savings that
are made from the health boards or that were already in
train. So how much of these savings can actually be
attributed to Health Benefits Limited and its efforts? How
much is its efforts?

Ah look it’s actually
a collective effort. What I’m trying to encourage in
District Health Boards is a more collaborative effort. So if
there is a smart procurement option being used in one or two
district health boards then it should be rolled across the
rest of the country.

So hang on. Those figures
that you were just quoting to me Minister they are not just
HBL efforts, that’s everybody’s
efforts?

Look they’re everybody’s efforts
and that’s why I’m trying to encourage this collective
approach and it’s set out in all the -

Can
you single out how much Health Benefits Limited, how much
benefit it has brought to the table? How much has it made in
savings alone so that we can assess the value of their
efforts properly?

Well the fact is HBL
doesn’t spend a lot of money buying goods and services,
all the savings come back to DHBs. And DHBs also work
collectively with HBL on other initiatives. So the figures
that are used are the collective effort, where everybody is
wanting to use the powers of bulk purchasing and
standardisation to deliver benefits for patients. So I
don’t think there’s much to be gained by saying who’s
generated what, the fact is that the savings should be made
so that the services can go into more hips and knees and
other elective procedures so New Zealanders. It’s a very
sensible strategy that even our critics acknowledge makes a
lot of sense to use that bulk purchasing to get the gains
that DHBs need. I’ve inherited a –

You talk
about your critics there minister. You talk about your
critics there minister. Is there a climate of fear around
this project because we’re hearing from people that
they’ve been told to keep quiet? Is that what you’re
seeing, a climate of fear, people unable to speak out about
what they feel is wrong?

I don’t think
anything could be further from the truth. You’ve seen the
memo from the Chief Financial Officers and comments by other
people. The fact is that we’re twelve weeks out from a
general election, our opponents what to take every
opportunity to cause trouble for the
government.

So this is politicking? That
they’re making this up? That it’s a figment of their
imagination?

I can certainly say that when
unsigned and undated memos are going around with words like
Ponzi scheme in it 12 weeks before an election, that is a
political response. My challenge as minister of health is to
make sure I work with what was a very inefficient system
that we inherited to make sure that DHBs and HBL work
together to generate savings. You know we inherited a
situation, just as one example, where the 20 district health
boards bought non-sterile surgical gloves from 18 suppliers
but there are only two manufacturers in the world. So there
are real opportunities there to have smart procurement and
HBL works cleverly and hard with the DHBs who work very
smartly as well. And they are all working to get these
procurement gains so that we can deliver that extra money
back into front line services for patients. This is a time
of change and you’re going to see some criticism, but I
think New Zealanders are seeing the benefits and will
continue to see
them.

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